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London is facing ‘a drawn-out period of house price realignment’

28th December 2017

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The property consultancy Hometrack says London is facing “a drawn-out period during which there will be a slow re-alignment of house prices and earnings” – likely to produce little or no growth in the near future.

“We expect London house price inflation to end 2018 around one per cent which means prices falling in real terms alongside a further decline in sales volumes” according to Richard Donnell, research and insight director at Hometrack.

“Over the last 12 months there has been a dramatic south to north shift in the momentum of house price growth which has culminated in Glasgow registering the fastest rate of house price inflation in the UK. In Glasgow, Edinburgh and many other large regional cities affordability is less of a barrier than in London and the south east, particularly for first time buyers, and with mortgage rates remaining low this is helping to stimulate demand and increase activity in these markets” Donnell adds.

Hometrack says that as we move into 2018, increases in regional city house prices is likely to offset very low nominal growth in London.

“There is 20 to 25 per cent of additional upside in house prices in regional cities with a simple adjustment on affordability metrics. Add to this the impact of lower mortgage rates and the clouds of uncertainty around Brexit seeming set to lift in 2018 and we expect regional cities to continue above average house price growth next year and overall city house price growth to hit five per cent” Donnell concludes.